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Barbara Pizzoni

Internacional (eng.)

The Supreme Court, with decision no. 25690 of September 4, 2023, rejected the refund claim of taxes paid in Italy by a well-known AC Milan player who moved to Paris Saint-Germain in 2012.

The player moved to France in the second part of the tax period, assuming tax residence in France with immediate effect.

In France, unlike in Italy, tax residence is integrated from the moment of transfer, even if the stay in that tax period is less than half of the period itself. On the contrary, in Italy residence for tax purposes is assessed over the entire tax period with the consequence that an individual who has met the requirements for tax residence for more than 183 days in a year is considered resident for tax purposes for the entire year.

The different criteria of the various the States on the matter of residence easily creates situations in which the taxpayer, following a transfer of residence, is considered a resident of two States for part of the tax period. In these situations, the Commentary on the OECD Model Tax Convention suggests applying the tie breaker rules to single fractions of the tax period.

The well-known football player in 2012 met the requirements for tax residence in Italy for 199 days and therefore – for Italian tax purposes – was resident in Italy for the entire tax period. For this reason he reported in its Italian tax return all the income received during the year. However, he then submitted a refund claim for the taxes paid in Italy on income earned after the transfer to France, arguing that the conflict of residence between Italy and France should be resolved by splitting the tax period pursuant to the Italy-France Convention, as interpreted in the light of the OECD Model and its Commentary.

The appeal was rejected by the Supreme Court, which considered the suggestion made in the OECD Commentary non-binding and stated that double taxation must be resolved by crediting in France, pursuant to the Italy-France Convention, the taxes paid in Italy. Moreover, according to the Supreme Court, the existence of the tax credit mechanism excludes any criticism of the Italian legislation for violation of the fundamental freedoms established by the TFEU.

The decision of the Supreme Court is in line with the approach of the Revenue Agency which since its resolution no. 471/2008 had always denied the possibility of splitting the tax period in all cases where this is not expressly provided for in the relevant double taxation agreement (this is the case of the tax treaties with Germany and Switzerland).